Ten Stable, High-Yielding Plays

Stocks with sustainable dividends can take some of the risk out of emerging markets. That trait could prove vital to investors in what’s expected to be a volatile 2015.

To create a list of such stocks, we parsed Société Générale’s monthly screen of emerging-market stocks with attractive dividends. These shares fell just 1.8% in December’s selloff, less than half the 4.4% decline of other members of the FTSE World Emerging index.

Their resilience has been validated over time: Developing-market companies with sustainable payouts backed by solid earnings, good balance sheets, and low default risk have returned 14.5% on an annualized basis over the past five years, compared to a 4% return for the universe.

By screening for companies with these strengths, the bank is also identifying shares that have performed steadily over time. We’ve chosen to feature the largest names by market value (below), figuring there is safety in size, and a better chance of a liquid U.S. listing. We tweaked SocGen’s screen, seeking names with a 3% or better yield.

These stocks aren’t necessarily cheap, since they tend to be popular emerging-markets plays. But Andrew Lapthorne, head of quantitative research at Société Générale, tells Barron’s that “a respectable 4% yield outside the U.S. means you can sit and let the yield compound.” Relative to U.S. Treasuries or cash, these stocks look less expensive, and “have proved useful in the past in generating a sensible return,” Lapthorne says.

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